2019 (10) TMI 517 - AT - Income Tax

Fringe benefit tax - addition of expenses relating to supply of electricity at concessional rates to employees - HELD THAT - The supply of electricity by the assessee to its employees at concessional rates would certainly be perquisite in terms of section 17(2) of the Act. However, it is incumbent upon the assessee to furnish evidence that the benefit given to employees in the form of supply on concessional rates is treated as perquisite and due taxes has been deducted at source. In the absence of such evidences, no fault can be found with the finding of the authorities below. Assessee during the course of hearing prayed that the issue may be restored to the file of the A.O. who can verify this fact by conducting requisite enquiries. D.R. strongly opposed this submission and stated that assessee was provided with sufficient opportunity in this regard. It will give second innings to the assessee without any reasonable cause. We have given our thoughtful consideration to the submissions made by the assessee and the Ld. D.R. The law is well settled that levy of tax should be at the right hand. In the case in hand, we have held that supply of electricity to its employees at a concessional rate would be a perquisite for the employees. Under these circumstances, the revenue is at liberty to proceed against the assessee for non-deduction of tax at source in the event, if the employees have offered the benefit for taxation in their respective returns, the assessee would not be liable for the FBT. It would be tantamount to double taxation. We therefore, set aside the orders of the authorities below and restore the issue to the file of the A.O. for verifying whether the employees offered such benefit in their returns, if any. - Assessee grounds raised in this appeal are allowed for statistical purposes.

Summary

Issues Involved:
1. Sustaining the addition of expenses amounting to ?7,36,09,000/- as Fringe Benefit Tax (FBT) for supplying electricity at concessional rates to employees.
2. The Assessing Officer's failure to consider the appellant's submissions properly.
3. The Commissioner of Income Tax (Appeals)-1 not giving sufficient opportunity to the assessee company to be heard.

Issue-Wise Analysis:

1. Sustaining the Addition of Expenses as FBT:
The primary issue is whether the supply of electricity at concessional rates to employees should be treated as a fringe benefit taxable in the hands of the employer or as a perquisite taxable in the hands of the employee. The assessee argued that the concessional supply of electricity is a perquisite and should be taxed in the hands of the employees, thereby falling outside the purview of FBT. The authorities, however, sustained the addition on the grounds that the assessee failed to provide evidence that the benefit was taxed in the hands of the employees. The tribunal referred to Section 115WB and Section 17(2) of the Income Tax Act to clarify that perquisites taxed in the hands of employees are excluded from FBT. It was concluded that the supply of electricity at concessional rates is indeed a perquisite, but the assessee must furnish evidence of TDS on such perquisite.

2. Assessing Officer's Consideration of Submissions:
The appellant contended that the Assessing Officer did not properly consider the submissions made. The tribunal noted that the Assessing Officer made the addition based on the assessee's failure to provide material evidence supporting that the perquisite was taxed in the hands of the employees. The tribunal emphasized the necessity of proper documentation and evidence to substantiate claims regarding tax treatment.

3. Opportunity to be Heard:
The appellant argued that the Commissioner of Income Tax (Appeals)-1 did not provide sufficient opportunity for the assessee to be heard. The tribunal acknowledged this contention but emphasized that the onus was on the assessee to furnish the necessary evidence during the proceedings. The tribunal decided to remand the issue back to the Assessing Officer for verification, allowing the assessee another opportunity to present the required evidence.

Conclusion:
The tribunal set aside the orders of the lower authorities and remanded the issue back to the Assessing Officer for verification. The assessee is required to provide evidence that the concessional supply of electricity was treated as a perquisite and that due taxes were deducted. If the assessee fails to do so, the Assessing Officer is at liberty to make the addition as per law. The appeal was allowed for statistical purposes, emphasizing the need for proper documentation and compliance with tax laws.